President’s name dragged into driving permits fight

Tuesday October 22 2019

Permits. People line up to renew and apply for

Permits. People line up to renew and apply for driving permits at Face Technologies (Pty) Ltd in Kampala. The fight to control Uganda’s computerised driving permit system has taken another twist with the Works ministry defending the contractor. COURTESY PHOTO 


Prime Minister Ruhakana Rugunda is expected to chair a meeting today to resolve a fight over the driving permit contract between the Works and Finance ministries which has also paralysed the Attorney General’s office and sucked in President Museveni’s name.
Dr Rugunda wrote to the three ministries last week calling for the meeting after heated written exchanges between Works and Finance over the contract.
Managed by South Africa’s Face Technologies (pty) since 2003, the contract over printing the computerised driving permits expires in May 2020.
“This is to invite you to a meeting to discuss and resolve the issues…” the PM’s letter to the officials reads in part. The meeting is scheduled for this morning in his office.
The Ministry of Works, with backing of a parliamentary resolution, says it is not ready to run the project with disruptions to end users and wants Face Technologies given a five-year transitional contract to train staff and make a seamless transition.
Finance insists government should take over the project when Face Technologies’ current contract expires.
Earlier this month, this newspaper revealed that Finance Minister Matia Kasaija and Permanent Secretary Keith Muhakanizi, separately wrote to the Works ministry citing a whistleblower report alleging anomalies in the management of the project and arguing against the extension.
Gen Katumba Wamala, the State minister for Works, responded with a 14-page letter against what he said were “unsubstantiated allegations” that were “in bad faith and biased”.
He also accused Finance of undermining his ministry’s policy-making role and warned that up to a million drivers could be left without verifiable permits if the transition is mismanaged.
Mr Gabriel Ajedra Aridru, the State minister for Finance (General Duties), who was holding fort in Mr Kasaija’s absence, responded to Gen Wamala on October 14, saying President Museveni had intervened in the matter.
He wrote: “While we note your Ministry’s position that a transitional management contract be granted to Face Technologies Pty to provide for proper transition upon expiry of the current contract in May 2020, in a meeting with H E the President on October 5, he directed that the issuance of driving permits should be transferred to Veridos upon expiry of the existing contract with Face Technologies Pty.”
The letter was copied to the Prime Minister and the Speaker of Parliament, but not to State House or to the President’s principal private secretary.
Sources in the Finance ministry told this newspaper that the Prime Minister’s meeting this morning is to end the bickering between the two ministries.
Dr Ruhakana is also expected to establish why the Attorney General’s office has failed to give a legal opinion after the Works ministry asked for guidance following a resolution by Parliament to extend the transition period under Face Technologies for five years.
Attorney General William Byaruhanga and his deputy Mwesigwa Rukutana have separately told this newspaper that consultations are ongoing but sources in the Attorney General’s chambers say there is “intense lobbying” to take over the multi-billion shilling contract.
Veridos, a German firm, is a joint-venture partner with the government-owned Uganda Printing and Publishing Corporation in the Uganda Security Company Limited, which has a ‘blank cheque’ contract to print all the government’s security documents.
The company lobbied intensively to print the country’s currency notes but, in the face of intense opposition from the Central Bank, settled for a broad range of other documents.
This newspaper has previously reported that the Works ministry has offered to buy blank security cards on which the permits are printed from Veridos but the company reportedly wants to take over the project and roll out an entirely new system.

Borrowing to build
Under the joint venture contract signed in October 2018, Veridos was supposed to build a factory in Uganda to print security materials locally.
Government, through UPPC contributed prime land in Entebbe worth €2,160,000 (Shs8.8 billion) as its contribution for 51 per cent equity in the project.
Project documents seen by this newspaper show that Veridos paid €680,000 (Shs2.8 billion) as part of its 49 per cent equity contribution. It isn’t clear how much more money, if any, the company paid in.
The joint venture company was also supposed to construct a factory in Entebbe in which to print security documents and personalise other products printed outside the country, including ePassports.
“We are excited to embark on this long-lasting partnership which will help the country to modernise its identity infrastructures and enable local production of security documents,” Mr Hans Wolfgang Kunz, the CEO of Veridos, said at the signing of the contract.
A year later, work is yet to begin on construction of the security printing factory at the UPPC premises in Entebbe.
Part of the delay, sources close to the company say, is because Veridos has been trying to borrow € 10,683,994 (Shs43.7 billion) from Stanbic Bank Uganda to build the factory, secured by the facility and the revenues expected from the security printing contracts.
Mr Yunus Kakande, the secretary in the Office of the President, wrote to the Solicitor General on October 1, supporting the company’s pursuit of a no-objection to the loan.
His letter shows that Veridos is banking on revenue from the driving permit contract to make its project more bankable.
“The financial model for repaying the loan facility was designed bearing in mind that the revenues from printing of passports will be able to adequately finance the loan instalments.
“With an expanded mandate of Uganda Security Printing Company to print national identity cards and drivers’ permits; the company will be in a much more comfortable position than before to meet its loan obligations within the time and amount constraints,” he wrote.
The €10.6 million loan from Stanbic Bank is supposed to be paid off in 78 months at an interest rate of the Euro Interbank Offered Rate, with a margin of 5.15 per cent, documents seen by this newspaper show.

In late September, Mr Muhakanizi raised concern over the terms of the loan including “the various indirect costs being passed onto the borrower which ordinarily are the normal costs incurred by the lender and are compensated from the marginal charges in the loan”.
He also noted that the interest rate was too high and suggested a marginal cap of four per cent.
Veridos’ officials have previously declined to comment on the Uganda operation.
In an mailed response, Mr Andrea Alton, a company official, wrote: “For further inquiries we kindly ask you to contact the responsible Ugandan ministries, which are Ministry of Finance, Planning and Economic Development, and the Ministry for the Presidency.”
A Finance ministry official, who asked not to be named in order to speak freely, said: “The contract allows the company to borrow to fund its operations so that isn’t necessarily a problem. What is worth noting is a situation where an investor brings in some money, signs contracts, and then borrows against those contracts for the money to invest. One might ask whether it doesn’t make more sense for the government to hire them as consultants to set up the factory and then pay for it.”
Outcome. Officials familiar with the matter say there are three possible outcomes: A transition period during which Face Technologies manages the project; a takeover by the Works ministry in which Face Technologies paid for the software and intellectual property, or a new system under Veridos.
It is not yet clear how much the permits would cost under a new system but they are likely to be costlier as the investor recovers their investment, including financing costs for the loan.